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Fitch Rates University of Maryland Medical System (MD) $395MM Revenue Bonds 'A'.



NEW YORK New York, state, United States
New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of
 -- Fitch Ratings Fitch Ratings

An international rating agency for financial institutions, insurance companies, and corporate, sovereign, and municipal debt. Fitch Ratings has headquarters in New York and London and is wholly owned by FIMALAC of Paris.
 assigns an 'A' rating to approximately $395 million Maryland Health and Higher Educational Facilities Authority revenue bonds, University of Maryland University of Maryland can refer to:
  • University of Maryland, College Park, a research-extensive and flagship university; when the term "University of Maryland" is used without any qualification, it generally refers to this school
 Medical System Issue (UMMS UMMS University of Massachusetts Medical School (North Worcester, Massachusetts)
UMMS University of Maryland Medical System
UMMS United Methodist Missionary Society
), series 2006. The series A-F bonds will be issued as fixed-rate and auction-rate securities, and variable-rate demand bonds. The series A bonds will be issued as uninsured fixed-rate bonds, while the series B, C and D bonds will be issued as auction-rate securities. The series B-F bonds are expected to be insured by FGIC FGIC

See Financial Guaranty Insurance Corporation (FGIC).
, which Fitch rates 'AAA'. The series E and F bonds will be issued as variable-rate demand bonds and will also be supported by the delivery of a liquidity facility provided by Dexia Credit Locale. Fitch expects to assign ratings to the series 2006B-F bonds nearer to their closing. In addition, Fitch has affirmed the 'A' rating for UMMS' outstanding debt. The Rating Outlook is Stable.

Bond proceeds will be used to fund routine, replacement and strategic capital needs of the system, including the construction of a new ambulatory care ambulatory care
n.
Medical care provided to outpatients.


ambulatory care,
n the health services provided on an outpatient basis to those who can visit a health care facility and return home the same day.
 building at the system's flagship hospital, University of Maryland Medical Center; the construction of a new inpatient tower at Baltimore Washington Medical Center Baltimore Washington Medical Center (formerly North Arundel Hospital) is a hospital in Glen Burnie, Maryland that is part of the University of Maryland Medical System (UMMS). It is also quite commonly known as BWMC. ; and expansion of the existing emergency room at Shore Health System, the system's newest affiliate. The series 2006A bonds are expected to sell the week of Oct. 23 via negotiation with JP Morgan. The series 2006B, C and E bonds are expected to sell the week of Nov. 6 via negotiation with JP Morgan. The series 2006D and F bonds are expected to sell the week of Nov. 6 via negotiation with Banc of America Securities.

The rating is based on the institution's continued profitability trends, strong state support, stable market position, increasing utilization, favorable rate increases, exclusivity of services in certain niche markets, and strong continued reinvestment in plant. Note that this analysis is based on internally generated documents and not on audited financial statements. Fitch does not expect any material changes between UMMS internally generated documents and fiscal year 2006 audited financial statements. The system's profitability has also been assisted by favorable rate increases from the Maryland Health Services health services Managed care The benefits covered under a health contract  Cost Review Commission. While operating performance was slightly behind last year's numbers, UMMS produced good profitability in fiscal year 2006, earning $51 million from operations (3.3% operating margin Operating Margin

A ratio used to measure a company's pricing strategy and operating efficiency.

Calculated by:
) and $62.6 million on the bottom line (4.0% excess margin), not including a one-time loss on early extinguishment of debt. This is slightly behind last year's performance when the system generated a 4.0% operating margin and 5.1% on the bottom line. This modest decline in profitability from prior years' performance stems from the additional costs associated with a 4.4% increase in admissions from fiscal year 2005. UMMS continues to receive strong state support for its capital needs. In fiscal year 2006, UMMS received $15 million from the state in support of its extensive capital plans. Fitch views favorably the system's continued reinvestment in its plant. For fiscal year 2006, capital expenditures as a percentage of depreciation expenses increased from 135.4% to 218.8%., well above Fitch's 'A' rated medians.

Credit concerns include the system's light liquidity stemming from its continued reinvestments for capital, future capital needs, and a competitive market. Management expects to invest $1.14 billion over the next five years (2007-2011) for various facility projects including a systemwide expansion and upgrade of its information technology, which Fitch views as critical to UMMS' continued success. Liquidity ratios and debt to cap ratios, which historically have been below Fitch's 'A' rated medians because of the system's substantial investment in plant over the past several years, will be further stressed after this financing. However, management projects that liquidity ratios will gradually improve to 120 days by fiscal year 2011 and debt to cap ratio is not expected to exceed 51.9% over the next five years. UMMS had 116 days of cash on hand and 70.5% cash to debt ratio as of June 30, 2006. UMMS operates in a competitive environment with several other large tertiary academic medical centers in the service area. As of June 30, 2005, UMMS had a market share of 15.5%, behind the 16.4% for Johns Hopkins Noun 1. Johns Hopkins - United States financier and philanthropist who left money to found the university and hospital that bear his name in Baltimore (1795-1873)
Hopkins

2.
 Health System and 17.9% for MedStar.

UMMS is an integrated health care integrated health care,
n healthcare services combining the best of conventional and complementary health care.
 network, providing hospital and physicians' services from seven hospital locations, multiple primary and specialty care centers, and other health-related entities throughout the Baltimore region. University of Maryland Medical Center, its key institution, is a full-service tertiary and quaternary quaternary /qua·ter·nary/ (kwah´ter-nar?e)
1. fourth in order.

2. containing four elements or groups.


qua·ter·nar·y
adj.
1. Consisting of four; in fours.
 academic medical center with 669 licensed beds. UMMS had $1.5 billion in total operating revenue operating revenue

Revenue from any regular source. Revenue from sales is adjusted for discounts and returns when calculating operating revenue. Compare other revenue.
 for fiscal year 2006, based on internally generated unaudited statements. Fitch does not expect any significant change in financial performance when audited financial statements are available. UMMS covenants to provide quarterly and annual financial disclosure to bondholders, which is available on the nationally recognized municipal securities information repositories. Disclosure to date has been excellent in terms of timeliness, content, and format. Quarterly statements include a balance sheet, income statement, cash flow statement, utilization, and management discussion and analysis.

The bonds listed below have the following ratings:

--$106,355,000 Maryland Health and Higher Educational Facilities Authority Hospital Variable Rate Demand Bonds, University of Maryland Medical System Issue, Series 2004A 'AAA/F1+'

--$34,440,000 Maryland health and Higher Educational Facilities Authority Hospital Revenue Bonds Hospital revenue bond

A bond issued to finance construction of a hospital by a municipal or state agency.


hospital revenue bond

Tax-exempt debt issued by a city, county, state, or hospital authority with debt service guaranteed by hospital
, University of Maryland Medical system Issue, Series 2004B(2) 'A'

--$50,950,000 Maryland health and Higher Educational Facilities Authority Hospital Auction Rate Revenue Bonds, Series 2004C(2) 'A'

--$46,250,000 Maryland Health and Higher Educational Facilities Authority Hospital Auction Rate Revenue Bonds, University of Maryland Medical system Issue, Series 2004D(2) 'A'

--$54,625,000 Maryland Health and Higher Educational Facilities Authority Hospital Revenue Bonds, University of Maryland Medical System Issue, Series 2002 'A'

--$99,240,000 Maryland Health and Higher Educational Facilities Authority Hospital Revenue Bonds, University of Maryland Medical System Issue, Series 2001 'A'

--$27,315,000 Maryland Health and Higher Educational Facilities Authority Hospital Revenue Bonds, University of Maryland Medical system Issue, Series 1991B(a) 'A'

--$150,000,000 Maryland Health and Higher Educational Facilities Authority Revenue Bonds, University of Maryland Medical System Issue, Series 2005(1) 'A'

--$27,630,000 Maryland Health and Higher Educational Facilities Authority Hospital Revenue Bonds, Memorial Hospital at Easton Issue, Series 1998(3) 'A'

--$1,965,000 Maryland Health and Higher Educational Facilities Authority, Hospital Revenue Bonds, Memorial Hospital at Easton, Series 1999(3) 'A'

--$25,920,000 Maryland Health and Higher Educational Facilities Authority, Hospital Revenue Bonds, Shore Health System Issue, Series 2004A(3) 'A'

(1) The 'A' represents an underlying rating; the bonds are expected to be insured by AMBAC Assurance Corporation Ambac Assurance Corporation

A subsidiary of publicly traded Ambac Financial Group that provides financial guarantees for municipal borrowers and for asset-backed and structured issues.
 whose insurer financial strength is rated 'AAA' by Fitch Ratings, with a liquidity facility provided by JPMorgan Chase JPMorgan Chase (NYSE: JPM TYO: 8634 ) is one of the oldest financial services firms in the world. The company, headquartered in New York City, is one of the leaders in investment banking, financial services, asset and wealth management and private equity. With assets of $1.  Bank.

(2) This is an underlying rating. The bonds are insured by Ambac Assurance Corporation which is rated 'AAA' by Fitch.

(a) This is an underlying rating. The bonds are insured by FGIC, which is rated "AAA AAA: see American Automobile Association.


(Triple A) A common single-cell battery used in a myriad of electronic devices of all variety. Like its double A (AA) cousin, it provides 1.5 volts of DC power. When used in series, the voltage is multiplied.
" by Fitch.

(3) These series of bonds will become members of the University of Maryland Medical System as part of this new financing.

Fitch's rating definitions and the terms of use Terms of Use are rules set up by the owner of an intellectual property or service to govern how they may be legally used.

In many cases, terms of service are used as a contractual agreement between a company and users of a service they provide.
 of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures Policies and Procedures are a set of documents that describe an organization's policies for operation and the procedures necessary to fulfill the policies. They are often initiated because of some external requirement, such as environmental compliance or other governmental  are also available from the 'Code of Conduct' section of this site.
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Date:Oct 11, 2006
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